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Global wheat output rose 12% to a record 682.3 million metric tons in the year through May.
According to Emmanuel Jayet of Agricultural Commodities Research at Societe Generale in Paris, wheat prices are expected to drop 13% by the end of December. The last big drop was during 2002 when prices fell by 19%.
Stockpiles of wheat will jump 12% by next May. Investors predict a further decline due to an overabundance. On October 30, there were 6.265 put options at $4.50 per bushel, more than any other grain contract ( a put option is an option to sell.)
Last year, wheat surged to a record $13.495 per bushel. Then as the recession started, prices fell back 29%. This year wheat futures rose 26% to $5.7475 per bushel on October 23rd.
Prices going forward will depend on foreign purchases, and dollar fluctuations. A weaker dollar would act as a buffer to stabilize prices. Another unknown is whether or not farmers will reduce next year's plantings to bolster prices.
Do you expect lower prices for wheat products at the supermarket?
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Reader Comments (Page 1 of 1)
11-04-2009 @ 12:23AM
Beltway Greg said...
Connie, Connie, Connie. We've had this little talk on the order of like 1000 times and each time your forget our lesson. There's a postulate, maxim, theorem, proof, or whatever you smart kids call it that governs any commodity market. Nobody really knows how much of this stuff (stuff is any and all commodities) that is out there lying around the farm or the patch. Bushels, pecks, jags, barrels, hogsheads. Once the price goes way up the kin get all upset and voila more of that stuff comes to market and the price goes down. When the price goes down them there farmer/driller people get all upset and you start to here tales of storage bins, boxcars, oil tankers, and the such just a burstin' with all manner o' goods and low and behold it starts to disappear. Remember oil? What's that fancy term: contango? It seems like 15 minutes ago it was at $35 and now all of a sudden its at $70 and the global economy really hasn't started to recover yet if the experts can be believed. Lesson? Commodity markets are horribly manipulated. Remember the Saudis won't let anyone check and see how much oil they really have. For all we know they might have just pumped their last barrel. How do you play it? Simple. Play the story. Whenever its in short supply and people are screaming sell and when there's far too much buy. Stockpiles will not jump by 12% by next May. As usual investors are wrong. Remember our little corn lesson? How did that play out?